Your Real Estate Agent for the whole life.

4 Key Factors That Drive the Real Estate Market

Real estate represents a significant portion of most people's wealth, and this is especially true for many homeowners in the United States. According to the Survey of Consumer Finances by the Federal Reserve, 64.9% of American families owned their own primary residence in 2019.1 The size and scale of the real estate market make it an attractive and lucrative sector for many investors. This article will look at some of the main factors that affect the real estate market and the variety of investments available.

What's the Best Investment?

The size and scale of the real estate market make it an attractive and lucrative market for many investors. Investors can invest directly in physical real estate or choose to invest indirectly through managed funds. Investing directly in real estate involves purchasing the residential or commercial property to use as an income-producing property or for resale at a future time. Indirect ways to invest in the real estate market include investing in real estate investment trusts (REITs), real estate exchange-traded funds (ETFs), commingled real estate funds (CREFs) and infrastructure funds. Due to the higher liquidity available in the market, the lower transaction costs, and lower capital requirements, average investors prefer to indirectly invest in real estate.

Key takeaways

• There are a number of factors that impact real estate prices, availability, and investment potential.
• Demographics provide information on the age, income, and regional preferences of actual or potential buyers, what percentage of buyers are retirees, and what percentage might buy a vacation or second home.
• Interest rates impact the price and demand of real estate—lower rates bring in more buyers, reflecting the lower cost of getting a mortgage, but also expand the demand for real estate, which can then drive up prices.
• Real estate prices often follow the cycles of the economy, but investors can mitigate this risk by buying REITs or other diversified holdings that are either not tied to economic cycles or that can withstand downturns.
• Government policies and legislation, including tax incentives, deductions, and subsidies can boost or hinder demand for real estate.

Bellbrae lifestyle property selling with cool indoor skate ramp.

Youngsters keen to follow in the footsteps of Tony Hawk will be in their element at a cool Bellbrae home with its own indoor skate ramp. The unusual feature is part of a fun-filled package that’s made 50 Cunningham Drive a magnet for the neighbourhood kids. The 2670sq m lifestyle property also comes with an in-ground trampoline, a solar heated swimming pool and spa.

Vendors photographer Amelia Anderson and carpenter husband Will Ryan installed the timber skate ramp in a shed to provide all-weather entertainment for their three children, aged four to 11. “We just wanted somewhere when it’s raining for the kids to hang out with their friends,” Ms Anderson said. “It’s a bit like a wet weather room where you still have your own space.”

The couple have just put their four-bedroom house on the market after completing a major extension and installing the self-cleaning 9m pool. A new pavilion, housing a rumpus room with a stunning stone fireplace and bi-fold doors onto the pool deck, is the centrepiece of the design. It is set on a lower level to the main open-plan living room, making it a popular chill out zone for children and adults alike. Joining the skate ramp in the powered and partially insulated shed is a purpose-built home office/studio and workshop. Ms Anderson said the space, rural outlook — best enjoyed from the home’s elevated deck — and the neighbours were her favourite things about the property. “There is definitely a strong sense of community, with everyone looking after each other,” she said.

“It’s a dead-end street, the kids ride their bikes out there and you know they are safe.” One Agency, Torquay agent Olivia Swann has listed the property with $2.45 million to $2.65 million price hopes. She said the design allowed for “really cool different zones” and loads of outdoor family fun. “The outlook is gorgeous, you just look over the rolling hills in Bellbrae,” Ms Swann said. Other features of the property include 30 fruit trees, vegetable boxes, a chook yard and 110,000-litre water tank.

Disclaimer: The information published in this section is of a general nature only and does not consider your personal objectives, financial situation or particular needs. Where indicated, third parties have written and supplied the content and we are not responsible for it. We make no warranty as to the accuracy, completeness or reliability of the information, nor do we accept any liability or responsibility arising in any way from omissions or errors contained in the content. We do not recommend sponsored lenders or loan products and we cannot introduce you to sponsored lenders. We strongly recommend that you obtain independent advice before you act on the content.

Rental demand hits record high. What does this mean?

City life is recovering, international travel has resumed and many people are returning to capital cities - all drivers of rental demand. At the same time, demand for rentals in regional hubs remains strong. The imbalance between the supply of rentals and demand has become more pronounced in the past few months in our capital cities and continues to be an issue in regional areas. There are several key reasons for this. First is the reopening of domestic and international borders. With travel again possible, short-term holiday rentals that were converted into long-term rentals during the pandemic are likely to be withdrawn. This is contributing to a shortage in the traditional rental supply.

The return of international students is also expected to drive up rental demand and exacerabete the shortage in inner-city suburbs. The second is that rental demand in the regions is unwavering. With remote working now widely adopted, many Australians are still looking to relocate to areas that offer nature-rich or seaside lifestyles. This has continued to put pressure on rentals in regional areas. To get a sense of just how much demand has increased we looked at the number of days it took a rental property to be leased after it was listed on realestate.com.au.

In February, the average days on site for a rental in Sydney was the shortest it's been since March 2017. On average, it took 22 days for a house or unit on realestate.com.au to be rented out last month. Melbourne also showed a similar trend with rentals, on average, being leased 24 days after they were listed. This is the quickest pace since March 2020. Rentals in Brisbane and Adelaide both had record average low days on site last month, at 16 days and 15 days respectively. Demand has been comparatively stronger in these capitals due to their affordability and lifestyle offerings. In Regional New South Wales, Victoria and Queensland, days on site for a rental have remained near record lows over the past year, a result of the pandemic-induced inner-city exodus. This rising disparity in rental supply and demand means different things for renters and landlords. Renters will be more out of pocket and will face increased competition from other prospective tenants, while landlords can expect a higher return on their investment and will find it a lot easier to rent out their properties. Longer term, relief for renters will likely come in the form of increased supply, as more investors enter the market - a trend we're already seeing. The value of new loans to investors has increased even further in 2022 and, as more investor purchases transact, renters may find themselves with a bit more choice and a bit less competition.